Microsoft Heads for Worst Month Since 2000: 4 Tech ETFs to Buy on the Dip

According to recent data published by Bloomberg, Microsoft MSFT is heading for its worst month since the dot-com era. The stock has lost 20% so far in June, putting it on course for its steepest monthly decline since December 2000, when it lost 24.4%. While this brutal selloff, which erased more than $570 billion in this software giant’s market value, may have deeply disappointed near-term investors, some may view this as a compelling dip-buying opportunity. Rather than betting on a single stock and losing havoc with its sudden freefall as it happened with MSFT, gaining exposure to tech exchange-traded funds (ETFs) holding Microsoft alongside other silicon giants may offer a more prudent strategy.Before identifying those ETFs, it is important to understand what caused Microsoft's decline, whether it is well positioned to regain its momentum over the long term, and why tech ETFs may offer a more diversified and potentially safer investment strategy.What Caused Microsoft’s Freefall?The recent slump witnessed in Microsoft's share price stems primarily from growing investor skepticism surrounding its massive artificial intelligence (AI) expenditures, with the company announcing during its fiscal third-quarter results that it expects $190 billion in capital expenditures through the end of 2026. This expense plan by Microsoft, which exceeded Wall Street expectations, made investors increasingly anxious about how long it will take for multi-billion-dollar infrastructure investments to translate into robust profit margins. Market experts have also expressed concern about margin compression in MSFT’s Azure cloud-computing business. Although Azure remains the company's fastest-growing segment, operating AI infrastructure is generating significantly lower gross margins than Microsoft's traditional on-premises software business.Consequently, anxiety among investors has been building up over the past few months, leading to repeated sell-offs in MSFT's shares and a cumulative year-to-date decline of approximately 24%.Will MSFT Rebound?Looking at historical data and underlying valuations, Microsoft's long-term growth prospects remain healthy. The company's forward price-to-earnings (P/E) ratio sits at a premium of around 19.1X compared to its peer group’s 15.68X, which, while high, is justified by its dominant enterprise footprint and expanding cloud ecosystem. The stock boasts a four-quarter average earnings surprise of 8.43% and a long-term (three-to-five years) earnings growth rate of 16.60%, which beat the industry’s growth rate of 12.40%.The Zacks Consensus Estimate for MSFT’s fiscal 2026 and 2027 revenues implies year-over-year growth of 17% and 16%, respectively. Microsoft's fundamental ability to monetize generative AI through its Azure platform and increased GitHub Copilot usage should help it achieve these targets, thereby positioning it to make a solid rebound in the long term.The stock’s short-term average price target of $554.04 reflects an increase of 48.55% from its last closing price of $372.97, implying a substantial upside from its current discounted price.The Rationale Behind Choosing Tech ETFsEven with Microsoft's solid potential for recovery, as mentioned above, some investors may remain skeptical given the recent downturn. For these cautious market participants, tech ETFs represent an excellent investment alternative.From a diversification standpoint, ETFs help mitigate the single-stock risk associated with holding an individual company, reducing the impact of earnings-related volatility. Rapid AI acceleration is already boosting the broader tech industry to unprecedented heights. Although the tech sector has witnessed notable macro sell-offs recently, the ultimate long-term potential of the industry remains robust, thanks to secular tailwinds like enterprise cloud migration, cybersecurity expansion, and advanced semiconductor manufacturing. Thus, capitalizing on this broad momentum via tech ETFs allows investors to participate in the AI revolution without exposing their portfolios to the vulnerability of a single corporate balance sheet.Tech ETFs to BuyWith AI infrastructure spending from major hyperscalers expected to reach approximately $725 billion in 2026, one may consider the following tech ETFs to buy on this historic Microsoft dip:Vanguard Information Technology Index Fund ETF Shares VGTThis fund, with net assets worth $170.1 billion, offers exposure to 323 companies from the following industries: technology software and services, technology hardware and equipment, and semiconductor and semiconductor equipment manufacturers. NVIDIA NVDA holds the first spot in this fund, with 16.77% weightage, while MSFT holds the third spot with 9.87% weightage. VGT has rallied 23.6% year to date. The fund charges 9 basis points (bps) as fees and traded at a good volume of 4.46 million shares in the last trading session. It sports a Zacks ETF Rank #1 (Strong Buy). Fidelity MSCI Information Technology Index ETF FTECThis fund, with net assets worth $21.38 billion, offers exposure to 287 information technology stocks. NVDA holds the first spot in this fund, with 16.73% weightage, while MSFT holds the third spot with 9.40% weightage. FTEC has rallied 23.9% year to date. The fund charges 8 bps as fees and traded at a volume of 0.26 million shares in the last trading session. It sports a Zacks ETF Rank #1. State Street Technology Select Sector SPDR ETF XLKThis fund, with assets under management (AUM) worth $120.67 billion, offers exposure to 74 companies from technology hardware, storage and peripherals; software; communications equipment; semiconductors and semiconductor equipment; IT services; and electronic equipment, instruments and components industries. NVDA holds the first spot in this fund, with 14.80% weightage, while MSFT holds the third spot with 8.79% weightage. XLK has surged 28.8% year to date. The fund charges 8 bps as fees and traded at a good volume of 11.85 million shares in the last trading session. It sports a Zacks ETF Rank #1. iShares U.S. Technology ETF IYWThis fund, with net assets worth $24.80 billion, offers exposure to 148 software, semiconductors, and tech hardware companies in the United States. NVDA holds the first spot in this fund, with 12.94% weightage, while MSFT holds the third spot with 8.48% weightage. IYW has risen 23.3% year to date. The fund charges 38 bps as fees and traded at a volume of 0.48 million shares in the last trading session. It sports a Zacks ETF Rank #1.    Boost Your Portfolio with Our Top ETF InsightsZacks' exclusive Fund Newsletter delivers actionable information, top news and analysis, as well as top-performing ETFs, straight to your inbox every week.Don’t miss out on this valuable resource. It’s free!Get it now >>This article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks